Community Infrastructure Levy

The Community Infrastructure Levy (CIL) provides an opportunity for local authorities to fund ‘community infrastructure’ support for new developments (such as transport, schools and hospitals), by charging developers. However, it also brings challenges, particularly in London, where both the Mayor and boroughs will be able to charge CIL. This briefing provides an overview of the government’s proposals and the Mayor’s plans and discusses the likely implications for boroughs.

Overview

Community Infrastructure Levy (CIL) is a levy charged to developers by boroughs to pay for the infrastructure needed to support a development. The larger a development, the more a developer will have to pay. It is a type of ‘planning obligation’. Any authority that levies CIL has to publish their tariff schedule, so developers can know the ‘cost’ of developing a given amount in that area, thus bringing more certainty to the planning process. Over time it is intended to replace Section 106 (S106) planning obligations (which are negotiated on a case-by-case basis by local authorities, and are thus less certain). As soon as a borough starts to charge CIL, S106 planning obligations can only be used for affordable housing and any site-specific requirements, for example a new access road required as a result of the development.

Timeline

- **2008** the Planning Act 2008 allows local authorities to levy CIL
- **April 2010** CIL regulations come into effect enabling it to be levied
- **November 2010** (new) government confirms that CIL stays, but with modifications
- **December 2010** Localism Bill published containing some modifications to CIL
- **Spring 2011** GLA consults on Mayoral CIL; also some minor changes announced by the government in November 2010 come into force
- **Summer 2011** government consults on Localism Bill’s revised CIL regulations
- **Autumn 2011** Mayoral CIL Examination in Public
- **April 2012** Mayoral CIL is levied (until 2019); MDCs can start charging CIL (see over) and CIL can be given to neighbourhoods to spend
- **April 2014** Boroughs no longer allowed to pool S106 contributions to fund general infrastructure needs that CIL could fund instead. Background

CIL was introduced in 2008, and offers many advantages to boroughs as it should be easier to secure contributions from new developments - only 7 per cent of developments in London involved a S106 agreement in 2007/8 (the latest year for which figures are available) and S106 agreements often involve lengthy negotiations.

Many more developments should be ‘captured’ by CIL and, as the charge is levied according to a published schedule, CIL will provide more certainty over the amount of money generated from a scheme, helping both boroughs and developers. The merits of this charging approach, combined with the fact that the 2010 CIL regulations placed restrictions on the use of S106 contributions from 2014, make it very likely that all local authorities will levy CIL in the future.

In November 2010 a number of technical modifications to CIL included a new requirement for local authorities to allocate a ‘meaningful proportion’ of CIL revenue raised back to the neighbourhood in which it was raised, to spend on the infrastructure that local people consider is most important. The government has not yet indicated what proportion it considers to be ‘meaningful’, although some have suggested that 5 per cent of gross CIL revenues could be viewed as appropriate.

Under the proposals in the Localism Bill, Mayoral Development Corporations (MDCs) will be able to charge CIL if they have been given full planning powers for their area. Subject to the outcome of a consultation, these revisions could then be included in further revised regulations due to come into force in April 2012.

CIL in London

In London, both the Mayor and the boroughs will be able to charge CIL (although only Redbridge has started doing so). Boroughs will be required to collect CIL on behalf of the Mayor. The funding agreement for Crossrail requires the Mayor to raise £300 million through CIL over the seven years up to March 2019 (the Crossrail construction period) in addition to £300 million being raised through S106 developer contributions. Although the regulations allow the Mayor to collect CIL for any strategic transport infrastructure, he will initially only use it for Crossrail. Further, although boroughs will be required to take account of the rate of Mayoral CIL when assessing the viability of their CIL rate, the Mayor will not be required to take account of borough CIL or S106 arrangements when setting his CIL.

The rates for the Mayoral CIL have been calculated based on the need to raise £300 million in seven years. The proposal is to split boroughs in to three zones as set out in Table 1 (below). These will have different charges to reflect varying levels of development viability. The zones are based on house prices which are being used as a proxy for all land values.

| Zone 1 | £50 | |--------|-----| | Camden, City of London, Westminster, Hammersmith and Fulham, Islington, Kensington and Chelsea, Richmond-upon-Thames, Wandsworth |

| Zone 2 | £35 | |--------|-----| | Barnet, Brent, Bromley, Ealing, Greenwich, Hackney, Haringey, Harrow, Hillingdon, Hounslow, Kingston upon Thames, Lambeth, Lewisham, Merton, Redbridge, Southwark, Tower Hamlets |

| Zone 3 | £20 | |--------|-----| | Barking and Dagenham, Bexley, Croydon, Enfield, Havering, Newham, Sutton, Waltham Forest |

Although boroughs will be required to take account of the rate of Mayoral CIL when assessing the viability of their CIL rate, the Mayor will not be required to take account of borough CIL or S106 arrangements when setting his CIL. The Mayor is proposing that developments used wholly or mainly for the provision of any education or health services will not pay the levy. Developments by charities for their own purposes, and affordable housing are excluded by law.

The Mayor intends to start charging CIL from Spring 2012 at which point boroughs will be required to collect it on his behalf so will need to have collection and enforcement procedures in place regardless of whether they are introducing CIL themselves.

Redbridge has proposed a flat rate charge of £70 per sqm and is working to a similar timetable for introducing CIL (this excludes an additional £35 Mayoral CIL charge).

Commentary

There are still some uncertainties about exactly how CIL will operate, particularly with regard to the more recently proposed requirement to allocate CIL to ‘neighbourhoods’. In addition, the fact that CIL is only charged on net additional development means that where development is on brownfield sites (which is often the case in London) CIL would only be paid on any floorspace, which is additional to that which was on the site originally. This could mean some developments paying less under CIL than under a borough’s existing S106 arrangements.

Although it will not be mandatory for boroughs to introduce CIL, the Government’s restrictions on the use of S106 agreements may effectively force boroughs to introduce CIL if they want to continue raising contributions from developers for anything other than affordable housing and site-specific requirements.

London Councils has raised concerns about the Mayoral CIL during the consultation period in early 2011. The Mayoral CIL effectively taking precedence over any borough CIL could impact on boroughs’ ability to secure funding for other local and sub-regional priorities that are currently funded through developer contributions, including the delivery of affordable housing.

London Councils is also stressing that TfL need to fully consider all possible alternatives before going ahead with the proposals for raising CIL, including the potential for generating this funding in other ways, such as increased borrowing, or from other parts of TfL’s budget, especially given that it represents a small proportion of this. In addition, TfL should also consider extending the period over which the charge is collected in order to reduce the amount that needs to be raised each year and thus the level at which the charge is set.

Further, the charge could act as a disincentive to development in London, at a time when it is particularly important to be focusing on the future economic prosperity of the capital. We are also lobbying the Secretary of State for Transport to ensure that those areas outside London which benefit from Crossrail also make a fair contribution to its cost.

Without further details it is impossible to tell exactly what impact the requirement to pass funding to neighbourhoods would have on boroughs.

Some already work closely with community groups when agreeing the S106 requirements on major developments and this could be viewed as an extension of that idea. It is also likely to make it easier to get local support for new developments which could be of benefit to boroughs.

However, there may well be tensions between what local communities view as necessary and what the local authority considers to be the priorities for the wider area. Such tensions are likely to be particularly acute in London where the Mayoral CIL will also have an impact on the amount of CIL that boroughs can raise making it even harder for them to balance the competing priorities locally.

In London, the need to split CIL between neighbourhoods, boroughs and the Mayor may mean that there is not enough for boroughs to fund necessary community infrastructure to support new development.

It may be that, for the duration of the Mayoral CIL, some relief on the requirement to pass CIL to neighbourhoods is necessary to make CIL a viable means to fund infrastructure. There are also issues regarding how any CIL passed to neighbourhoods will be accounted for - who will have the authority to spend the money, and how?

Ultimately, there is a very real concern that the borough CIL will end up being squeezed between the requirements of neighbourhood CIL and the Mayoral CIL, leaving very little for local infrastructure requirements such as schools, clinics and local transport.

Author: Nigel Minto, Head of Housing and Planning (T: 020 7934 9805) Click here to send a comment or query to the author

Links: More information on the CIL (CLG website) London Councils response to CIL consultation

This member briefing has been circulated to: Portfolio holders and those members who requested policy briefings in the following categories: Housing, Planning